There’s a lot of buzz about the imminent opportunities implicit in the passing of the JOBS Act and the deregulation of hedge fund marketing. The freedom and flexibility that will be afforded by this act have sent ripples of anticipation through a bustling community of firms keen to put themselves in the spotlight and attract fundraising attention. When the floodgates finally do open, a wave of hedge funds that have hitherto been restricted in their advertising activities will be unleashed on an audience of deep-pocketed investors who must meet the “qualified investor” requirement but are not equipped to navigate their way through this mire of investment options. This is a complex and confusing world, touting products that very often are not widely or well understood, in which risk is perceived as valid but which lurks, unintelligibly, somewhere in the small print.
So are the commentators and speculators, as well as the firms themselves, overlooking a critical issue? Examine the mix: a relaxing of restrictions and a new freedom to advertise; hungry and competitive funds champing at the bit to fire out messages; an audience which may well lack understanding; complexity of products which can be ill-defined; an industry that is very often misunderstood… All these point to the need for education.
There is abundant opportunity for ‘education’ but this first requires clarity vis-à-vis the fundamentals of the fund: what it offers, to whom, where, how, and to what benefits. This foundation, the brand bedrock, reflected in an appropriate and distinctive brand positioning, is a core component of every successful organization. It constitutes the essential platform on which clear messaging can be built and from which targeted advertising campaigns can be launched. This is the brand, and without it no advertising campaign is going to be effective.
The requirement for funds to update their online and marketing materials to reflect compliance obligations presents a logical opportunity for pause and review. So before managers go crazy spending dollars on ads they need to take a hard look at themselves and ask some serious questions. In order to convince audiences that they are the best place to invest, they might consider leading by example and ‘investing’ in one of the most important assets they own.